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CBS News
2 days ago
- Business
- CBS News
5 common annuity mistakes to avoid now, retirement experts say
A common fear among retirees is running out of money. Though inflation isn't as high as it was in previous years, the cost of living is considerably higher today than it was just five years ago, and those on a fixed income are uniquely vulnerable. And, as fears of a recession and other economic hurdles loom, many people nearing retirement are eyeing annuities as a source of income security. An annuity is a contract that allows you to exchange a lump sum payment or a series of payments today for a guaranteed future income. They're a popular retirement tool for someone concerned about running out of money before they die, and annuities come in all different forms, including fixed, variable and indexed. But while they can be useful, annuities can also be a complex financial tool, and it's easy to make a mistake that could derail your retirement plan. Here's what to know about the common annuity mistakes people make now. Find out how the right annuity can help you reach your retirement goals now. To help you navigate the world of annuities, we spoke with several retirement experts to find out some of the common missteps retirees make and what you can do to avoid them. Perhaps the most common mistake retirees make with annuities is not fully understanding how they work, experts say. Not only are annuities complicated, but unlike many other retirement savings tools, they're also difficult (and sometimes expensive) to get out of. "I think the biggest mistake we see with prospective clients is they often don't understand what they were sold, how they work, what the fees are, and how they benefit from the product," says Tyler End, a certified financial planner (CFP) and CEO and co-founder of Retirable. "Often, there's a sales pitch promising upside with limited or no risk that sounds great, but people don't always understand the intricacies behind the product that actually make it a bad fit for their situation." To avoid this pitfall, End recommends working with a reputable professional, such as a CFP, who can confidently explain how the annuity works and why it may be the best option for your situation. And, the advisor you work with should deliver you a complete financial plan, not just sell you an annuity, End says. That financial plan may include Social Security benefits, your 401(k), and other savings and income vehicles, in addition to the annuity. "If it sounds too good to be true, it probably is," End says. "We often hear from customers that their 'investment' can only go up and has no fees. Digging into the contracts reveals another story, and they are stuck with surrender charges if they want to get out. Remember, annuities are an insurance contract first and foremost." Explore your annuity options and lock in a great rate today. There are many types of annuities on the market, including fixed, variable, and indexed annuities, immediate and deferred annuities, qualified and nonqualified annuities, and more. When shopping for an annuity, it's critical to choose the one designed to meet your specific goal. "Annuities aren't all built the same—some focus on income, others on principal growth," says Fradel Barber, a ChFC and CEO of The World Changers, a company focused on financial education in the insurance industry. "If someone buys an income-based annuity but expects to see their account value grow, they're going to be disappointed. That mismatch can throw off their entire retirement plan." Barber recommends starting with your actual goal and working backward. Do you want a steady source of income? To make your retirement savings last as long as possible as long as possible? To make sure your spouse is protected if something happens to you? Once you know your goal, you can work with a professional to choose the best type of annuity to accomplish it. An annuity is designed as a long-term investment, and you're likely to run into trouble (and lose money in the process) if you hope to tap into that money early. "It's paramount that seniors don't see their annuity as a substitute for a bank account. It is not a liquid asset where cash can be taken out whenever they need it," says Jeff Lorenzen, CEO at American Equity. "There are often hefty penalty charges for early withdrawal, and while some contracts do offer hardship provisions, accessing funds can be costly, and the situations where access is permitted will be limited." Sure, unforeseen situations can arise where you have to withdraw money when you didn't plan on it. You still need to put safeguards in place, though, including a robust emergency fund, to minimize the chances of having to withdraw from your annuity. Inflation is one of the greatest fears of many retirees, and for good reason. Most people retire with a fixed amount in their savings, but the cost of living continues to rise, making it more likely they'll run out of money. And unfortunately, some retirees don't take inflation into account when they choose an annuity. "Most retirees invest in fixed annuities, which pay a fixed amount, which is not inflation-adjusted," says Rami Sneineh, a licensed insurance producer and the vice president of Insurance Navy. "The payout may appear to be adequate, but in the long term, inflation may reduce its value over several years or decades." Let's say you retired in 2010 with an annuity that provided $4,000 of income per month. Fast forward to June 2025, and you would have needed roughly $6,000 to maintain the same standard of living, according to the Bureau of Labor Statistics inflation calculator. To protect your future self, Sneineh recommends looking for an annuity that provides a cost-of-living adjustment to ensure your buying power doesn't decline over time. Scams often target people in financially vulnerable situations, and that includes current and soon-to-be retirees. And, in addition to all the scams on the market, you may also run into financial advisors who don't have your best interests in mind when recommending an annuity. But carefully choosing who you buy an annuity from can help weed out scams and bad actors. "Avoid clicking on online ads that promise annuity rates and bonuses that seem too good to be true," says Chris Orestis, president at The Retirement Genius. "When working with a financial advisor, make sure that they are allowed to sell annuities from multiple companies and are showing you multiple options." An annuity can provide financial security and peace of mind for someone worried about running out of money during retirement. But with the complexity of most annuity contracts and the sheer number of options on the market, it can be far too easy to end up with a product that doesn't fit your needs. The most important first step of buying an annuity is working with a financial professional who has your best interests in mind. From there, make sure you've explored all of your options and choose an annuity that best fits your goals. Don't commit to anything until you fully understand the product and its terms. And remember that annuities aren't right for everyone. In the end, you and your advisor might decide that a different financial product is a better fit for reaching your goals.
Forbes
2 days ago
- Business
- Forbes
Roth IRA Vs Traditional IRA How Much Will You Withdraw For Retirement?
Woman contemplating Roth IRA vs Traditional IRA decisions Roth IRA vs Traditional IRA retirement savings decisions are some of the most important financial choices you'll make when planning for retirement. Choosing between these two types of accounts can significantly impact their future income, tax burden, and financial flexibility. That said, there are two retirement phases to consider regarding this decision: saving up for retirement and how much you will spend in retirement on a.k.a. withdrawals, a.k.a. distributions a.k.a. decumulation. In this first part of a two-part series, I will start with the end in mind, spending. In this article, we'll explore the implications of withdrawals in each type of account, why the tax differences matter, and how aligning your strategy with your values, such as passing on savings to heirs or making charitable contributions can help you retire with both peace of mind and IRA vs Traditional IRA: Understanding Traditional IRA Taxes The first step in retirement planning if you have a long-time horizon is deciding how much income you want to spend. As horizons shorten, the question becomes how much income will my resources and current savings allow me to spend? Distributions from Traditional IRAs are taxed as income, while Roth IRA withdrawals are tax-free. While there are many potential retirement income strategies, to simplify the tax analysis, we will assume a flat annual income. Let's consider a simple scenario: Provisional Income determines how much of your Social Security is taxable: Provisional income = Half of your Social Security + Other taxable income = 50% × $25,000 + $X (Traditional IRA/401(k)/403(b)/457/TSP withdrawals) Provisional Social Security Income Because you'll be withdrawing at least $50,000, currently 85% of your Social Security will be taxed. 85% × $25,000 = $21,250 taxable Social Security Withdrawals from these accounts tax both the original savings any matching contributions and all of the growth. Assume $63,000 gross withdrawal from IRA/401(k)/403(b)/457/TSP: 2025 tax brackets for single filer (estimated): Federal income tax brackets Single filers for scenario Total federal tax = $1,160 + $4,266 + $4,708 = $10,134 Income Realized After Tax on Social Security and Withdrawals Ultimately, to net the $50,000 you had to pull more than what you IRA/401(k)/403(b)/457/TSP Tax Scenario Traditional IRA Federal Tax Scenario This calculation does not include state taxes. Depending on where you reside in retirement you may have to increase IRA vs Traditional IRA: Understanding Roth IRA Taxes If all your retirement savings are in Roth accounts (Roth IRA or Roth 401(k)), the outcome is very different from the Traditional IRA/401(k)/403(b)/457/TSP scenario. Here's a detailed breakdown of how much you'd need to withdraw to get $75,000 in post-tax income, assuming $25,000 from Social Security and needing $50,000 from your Roth accounts. Current Federal Tax RulesSocial Security Provisional Income Calculation Provisional income = Half of Social Security + taxable income = 0.5 × $25,000 + $0 = $12,500 Roth IRA tax scenario That means you need less in Roth savings to achieve the same spending power as you would in IRA/401(k)/403(b)/457/TSP. As you know, retirement is not a point in time but over time. Unfortunately, a time period that is unknown as my 96-year-old mother approaches her 97th birthday. Inflation has changed her spending needs since she retired at 62. Wish you had more money in Roth accounts? In 'Use Roth IRA Conversions to Cut Your Taxes and Boost Retirement Income' I explore how conversions can help manage taxable income and reduce Medicare IRMAA (Income-Related Monthly Adjustment Amount) IRA vs Traditional IRA: Required Minimum Distributions Traditional IRAs have RMDs whereas Roth accounts do not. With RMDs, the government says that you have had a tax holiday for quite a while and we need to start collecting revenue. This can speed up the depletion of your accounts for your own use, much less for heirs that you may have hoped would reap the rewards of your unused funds. For more on IRA withdrawal rules, visit the IRS Required Minimum Distributions (RMDs) IRA vs Traditional IRA: Income Related Monthly Adjustment Amount (IRMAA) In addition to this consideration, you should also consider Medicare's IRMAA. This adjusts the monthly premium on your Medicare premiums. While IRMAA has a tiered system similar to the tax brackets, it is not as kind. Medicare Income Related Monthly Adjustment Allowance First, once you hit the tier, you are in that tier, there is no averaging of the brackets. Furthermore, if you are 1$ over, you are in the next bracket. In this case, your required minimum distribution, not your needed income, could push you into this new IRMAA bracket. I know a few people where their RMD pushed them into a higher IRMAA IRA vs Traditional IRA: Taxes Over a 30-year period Consider the following assumptions of a 30-year period Roth vs. Traditional IRA comparison assuming:30-Year Account Depletion Comparison (Inflation-Adjusted) If you were to fully deplete each account over 30 years to meet your retirement income goal (adjusted 3% annually for inflation): Roth IRA vs Traditional IR Account depletion You can easily see that you would need $1.39 million more in Traditional IRA/401(k)/403(b)/457/TSP than in Roth to generate the same after-tax income over 30 years. Roth accounts provide a major advantage in tax efficiency and simplicity, especially in retirement years with predictable income Thoughts Roth IRA vs Traditional IRA Savings All of the Roth IRA vs Traditional IRA scenarios were simplified in order to highlight the difference in savings from a future tax perspective. While many financial professionals have suggested diversifying the savings approaches. Under the scenario that I have laid out, clearly there is one winner. Many mistakenly believe that there IRA savings gives them a much larger current deduction than it already does. If you target the zero tax of Roth, you are taking tax increase risk off of the table. Also, your cognitive powers are likely going to decline somewhere during a long retirement period. This may nullify the great tax diversification you had developed during your younger days. All of this said, I don't believe in one size fits all. Your circumstances may be unique. I hope that this article on Roth IRA vs Traditional IRA encourages you to build your own scenarios and to stress test and build your own and stress test them.
Yahoo
4 days ago
- Health
- Yahoo
I'm ‘medically retired' at 54 — what can I do to stretch my savings now that my whole timeline's been tossed out?
If you're 'medically retired' it means you've had to leave the workforce early due to a long-term or permanent disability. Don't miss Thanks to Jeff Bezos, you can now become a landlord for as little as $100 — and no, you don't have to deal with tenants or fix freezers. Here's how I'm 49 years old and have nothing saved for retirement — what should I do? Don't panic. Here are 6 of the easiest ways you can catch up (and fast) You don't have to be a millionaire to gain access to this $1B private real estate fund. In fact, you can get started with as little as $10 — here's how Since you're only 54, you probably left your job years before you planned to. A 'medical retirement' can come as a major blow since it may leave you short of your planned retirement nest egg — and worried about your future. You're not alone. Indeed, almost six in 10 retirees retired sooner than planned (58%), according to a study by the Transamerica Center for Retirement Studies. In almost half (46%) of these cases, the reason was personal health-related. At the same time, only one in five (21%) retired early because they were financially able. We'll consider your options as you look to financially adapt. Insurance and government programs could help Most people plan to retire gradually — ideally by choice, in their mid-60s, with solid savings. Medical retirement disrupts that timeline completely, often cutting a decade or more off your working life. That loss of earning years reshapes your entire financial plan. But you may have some options. Two potential sources of income for those unable to work due to medical conditions are critical illness insurance (CII) and long-term disability insurance (LTD), which you may have through your past employer, private insurance or both. CII provides a one-time payout if you're diagnosed with a 'covered' illness, as specified in the policy — which typically includes heart attack, stroke and cancer. LTD insurance pays a portion of your income — typically between 60% and 80% of your monthly salary — if you're unable to work due to illness or injury. There's a waiting period of 90 days to a year before your coverage will begin, during which time it's expected that you'll be covered by short-term disability insurance. Once your coverage begins, it may extend until what would be your normal retirement date. LTD might provide coverage for your condition. There are also a number of government programs for adults with disabilities, such as Social Security Disability Insurance (SSDI). To qualify for SSDI, you're required to have worked in a job covered by Social Security and to meet Social Security's definition of disability, which is strict — so it can be hard to qualify. If you're still receiving SSDI benefits when you reach your full retirement age, you'll then switch to receiving your Social Security retirement benefit — but your benefit amount will remain the same. When you are older than 65, and if you have little income and resources, you could also qualify for Supplemental Security Income (SSI). Read more: Want an extra $1,300,000 when you retire? Dave Ramsey says — and that 'anyone' can do it If you're disabled, you could also qualify for Medicare even if you're under 65 — say, if you've received SSDI for 24 months or have certain medical conditions. If you receive SSI, typically you're automatically eligible for Medicaid. The military has a pathway for medical retirement if you're deemed unfit to continue your service due to a physical or mental condition. A Medical Evaluation Board and Physical Evaluation Board will determine if you qualify. The federal government also has a disability retirement program, though it too has strict eligibility requirements. However, it could be an option for federal workers. Other levels of government and teacher pension plans — and, very rarely, private sector employers — may also offer forms of disability retirement. Making a new plan for the future You will also need to revisit your retirement plans. You may want to consider working with a financial advisor to ensure you're optimizing your investments to match your risk tolerance, investing horizon and income needs, as well as to revisit your withdrawal strategies to minimize taxes. You'll also need to decide when to start receiving Social Security benefits. You'll be eligible at 62, but the longer you wait, the higher your benefit amount will be. You've lost a considerable amount of time to build up further retirement savings and will be drawing from your nest egg much earlier than anticipated. So it could be helpful to draw up a new budget and slash discretionary spending wherever possible. Calculate a safe withdrawal rate — the 4% rule applies for a 30-retirement period, so your annual withdrawals may have to be lower than that. Moving to a lower-cost state could be a good idea. If you downsize your home at the same time, you may be able to contribute excess home equity to your retirement nest egg. Your advisor could also help you find sources of income from your existing assets, such as making withdrawals from your life insurance policy. While it won't necessarily be easy, you can still live a comfortable life in retirement, even if you're 'medically retired.' What to read next Robert Kiyosaki warns of a 'Greater Depression' coming to the US — with millions of Americans going poor. But he says these 2 'easy-money' assets will bring in 'great wealth'. How to get in now Accredited investors can now buy into this $22 trillion asset class once reserved for elites – and become the landlord of Walmart, Whole Foods or Kroger without lifting a finger. Here's how Rich, young Americans are ditching the stormy stock market — here are the alternative assets they're banking on instead Here are 5 'must have' items that Americans (almost) always overpay for — and very quickly regret. How many are hurting you? Stay in the know. Join 200,000+ readers and get the best of Moneywise sent straight to your inbox every week for free. This article provides information only and should not be construed as advice. It is provided without warranty of any kind. Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Associated Press
7 days ago
- Business
- Associated Press
Simplicity Expands its Strategic Offering with the Acquisition of Planscope360™ and Welcomes New Partners, Al Otto and Robert McLean
SUMMIT, N.J., July 23, 2025 /PRNewswire/ -- Simplicity Group Holdings ('Simplicity'), a leading financial products distribution firm, today announced the acquisition of Planscope360™ (Planscope), a Durham, NC-based integrated administration platform dedicated to serving the K-12 market. Initially backed by Verity, a recent Simplicity acquisition, Planscope360 is led by Al Otto and Robert McLean, both of whom join as Simplicity Partners. 'We are thrilled to welcome Al, Rob and the Planscope team to Simplicity and we join their commitment to serve educators and administrators with a revolutionary platform designed to improve access to top quality accumulation and protection products,' said Bruce Donaldson, Partner and CEO of Simplicity. 'With Simplicity's resources and support, we will be able to improve the retirement planning process and increase participant engagement for K-12 educators and administrators across the country.' 'Planscope360 was built to create a new standard of best practice in Governmental 403(b) and 457(b) plan oversight. We are proud to partner with Simplicity to expand this platform with enhanced products and technology for K-12 educators and administrators,' said Al Otto. 'With Amy Simonson and Jeff Munsey providing great thought leadership, we know that joining forces with Simplicity allows us to improve our efficiencies and bring transparency and accountability to the industry.' Robert McLean added, 'Planscope has been focused on introducing a new paradigm in retirement planning to the K-12 workforce, simplifying the process to deliver more engagement and enrollments. Our strategic alignment with Simplicity is complemented by our shared values and culture and we are excited to combine forces and better serve this important community or educators.' About Planscope360TM PlanScope360™ delivers integrated savings and retirement plan solutions specifically designed for school districts. From retirement to financial wellness programs, PlanScope360™ helps districts attract and retain top talent while managing costs with full transparency. For more information, please visit About Simplicity Group Simplicity is the leading partner for advisors, financial institutions, and consumers by delivering the best combination of wealth accumulation and financial protection products that meet the needs of a consumer-oriented holistic financial plan. As one of the fastest growing partnerships in the financial services industry, Simplicity offers an unrivalled array of tools and technologies to grow and protect wealth, which can be accessed through affiliation, outsourcing, or joining the partnership. In an ever-changing environment, Simplicity's commitment to working in our clients' best interest is unwavering and has always been anchored to our commitment to Education, Value, and Partnership. For more information, please visit: and follow the Company on LinkedIn. MEDIA CONTACTS View original content to download multimedia: SOURCE SIMPLICITY FINANCIAL MARKETING
Yahoo
22-07-2025
- Business
- Yahoo
Jackson Launches New Digital Experience for Financial Professionals
Customized, self-service enhancements include new Product Match Pro tool to help identify which products most closely align with a client's retirement planning goals LANSING, Mich., July 22, 2025--(BUSINESS WIRE)--Jackson National Life Insurance Company® (Jackson®), the main operating subsidiary of Jackson Financial Inc.1 (NYSE: JXN), recently launched a new digital experience for financial professionals on the company's website, The new, easy to navigate section of the website provides personalized content, self-service enhancements, new tools to help educate financial professionals on the Jackson products that best meet their clients' needs and information on how to find a local Jackson wholesaler for tailored support. "We're proud to launch these new enhancements to our site, expanding the ways we are providing industry-leading service to meet the needs of financial professionals and their clients," said Aileen Herndon, Senior Vice President, Distribution Marketing, Jackson National Life Distributors LLC, the marketing and distribution business of Jackson. "We sought input from financial advisors throughout the site development process, ensuring our updates would meet their needs, reduce pain points and make it easier for them to do business with us. This improved digital experience is designed to provide clarity for advisors and clients, deepening existing relationships and attracting new advisors looking to solve their clients' needs in retirement." The site is accessible from the home page. Visitors can expect a consistent look and feel across the entire website, and continued access to award-winning tools and resources. New tools featured as part of the digital experience include: Product Match Pro: This tool helps financial professionals identify which Jackson product may best align with a client's needs by asking a series of retirement goal questions. Based on the responses to those questions, Product Match Pro will show the benefits and features of multiple Jackson products that best align with a client's needs. Find Your Wholesaler: Financial professionals who don't currently have a relationship with a Jackson wholesaler can use this tool to find contact information for a wholesaler in their area who can provide personalized support. In addition to the new tools, financial professionals will enjoy a personalized experience with tailored journeys based on their profile, client needs and channel, including banks, wirehouses, broker-dealers and RIAs. Financial professionals will also have access to enhanced self-service options including a pending new business tracker and claims initial notice. Financial professionals who would like to learn more about Jackson's dedicated financial professionals site can contact the company at 1-800-711-7397, connect with their local wholesaler or explore the financial professional site on at ABOUT JACKSON Jackson® (NYSE: JXN) is committed to helping clarify the complexity of retirement planning—for financial professionals and their clients. Through our range of annuity products, financial know-how, history of award-winning service* and streamlined experiences, we strive to reduce the confusion that complicates retirement planning. We take a balanced, long-term approach to responsibly serving all our stakeholders, including customers, shareholders, distribution partners, employees, regulators and community partners. We believe by providing clarity for all today, we can help drive better outcomes for tomorrow. For more information, visit *SQM (Service Quality Measurement Group) Call Center Awards Program for 2004 and 2006-2024. (Criteria used for Call Center World Class FCR Certification is 80% or higher of customers getting their contact resolved on the first call to the call center (FCR) for 3 consecutive months or more.) Jackson® is the marketing name for Jackson Financial Inc., Jackson National Life Insurance Company® (Home Office: Lansing, Michigan) and Jackson National Life Insurance Company of New York® (Home Office: Purchase, New York) Before investing, investors should carefully consider the investment objectives, risks, charges, and expenses of the variable annuity and its underlying investment options. The current contract prospectus and underlying fund prospectuses provide this and other important information. Please contact your Jackson representative to obtain the prospectuses. Please read the prospectuses carefully before investing or sending money. Jackson, its distributors, and their respective representatives do not provide tax, accounting, or legal advice. Any tax statements contained herein were not intended to be used and cannot be used for the purpose of avoiding U.S. federal, state, or local tax penalties. Tax laws are complicated and subject to change. Tax results may depend on each taxpayer's individual set of facts and circumstances. Clients should rely on their own independent advisors as to any tax, accounting, or legal statements made herein. Guarantees are backed by the claims-paying ability of Jackson National Life Insurance Company or Jackson National Life Insurance Company of New York. For variable annuities, guarantees do not apply to the principal amount or investment performance of a variable annuity's separate account or its underlying investments. They are not backed by the broker/dealer from which this annuity contract is purchased, by the insurance agency from which this annuity contract is purchased or any affiliate of those entities, and none makes any representation or guarantees regarding the claims-paying ability of Jackson National Life Insurance Company or Jackson National Life Insurance Company of New York. The Product Match Pro tool does not provide specific recommendations. The tool's output, or "results", is for informational purposes only. Each individual client has specific needs, and it is up to a financial professional and their client to understand what product(s) best meets the client's needs. Additionally, Product Match Pro does not consider the full universe of Jackson annuity products. Jackson offers and issues other annuities with similar features, benefits, limitations and varying charges. Annuities are long-term, tax-deferred vehicles designed for retirement. Variable annuities and registered index-linked annuities involve investment risks and may lose value. Earnings are taxable as ordinary income when distributed. Individuals may be subject to a 10% additional tax for withdrawals before age 59 ½ unless an exception to the tax is met. Add-on living benefits are available for an extra charge and may be subject to conditions and limitations and there is no guarantee that an annuity with an add-on living benefit will provide sufficient supplemental retirement income. Products and features may be limited by state availability, and/or your selling firm's policies and regulatory requirements (including standard of conduct rules). 1 Jackson National Life Insurance Company is a wholly owned subsidiary of Jackson Financial Inc. Jackson Financial Inc. is a publicly traded company. View source version on Contacts Media Contact: Patrick Sign in to access your portfolio
